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Ceos of all of the National Banks and Federal Savings Associations, Department and Division Heads, All Examining Personnel, and Other Interested events
Any office associated with the Comptroller associated with Currency (OCC) is issuing this guidance to describe security and soundness measures that nationwide banking institutions and federal savings associations (collectively, banking institutions) should follow when they provide income tax refund-related services and products. This guidance replaces OCC Bulletin 2010-7 (18, 2010), which transmitted the “OCC Policy Statement on Tax Refund-Related Products, ” but does not supersede or amend any other OCC issuances february.
Note for Community Banks
This guidance pertains to all OCC-supervised banking institutions that provide income income tax refund-related services and products.
The guidance outlines security and soundness measures banking institutions should follow when they provide taxation products that are refund-related. Those measures include
- Making sure the lender’s board of directors maintains sound danger administration policies, procedures, and techniques to oversee all tax refund-related services and products.
- Applying effective interior controls and review criteria to promote and solicitations.
- Providing disclosures that are appropriate explain material aspects of the merchandise to consumers.
- Applying appropriate diligence that is due adequate procedures to make sure that tax refund-related services and products given by 3rd parties conform to relevant guidance.
- Making sure Bank Secrecy Act (BSA) conformity danger management systems cover income tax products that are refund-related.
- Providing training programs (including certification processes) that target regulatory demands, interior policies and procedures, and duties for keeping a compliance program that is effective.
- Maintaining capital that is adequate liquidity amounts.
- Developing prompt and management that is accurate systems (MIS) for taxation refund-related items.
- Ensuring the financial institution’s conformity along with relevant legal guidelines, including those consumer protection that is involving.
The term “tax refund-related services and products” encompasses credit items, deposit services and products, and settlement solutions to transmit tax-related http://speedyloan.net/installment-loans-il funds. Tax refund-related items present safety that is particular soundness and conformity dangers, due to (1) their particular repayment and expense structures and (2) banking institutions’ reliance on third-party taxation return preparers who communicate with customers. With appropriate customer defenses and danger management controls that target security and soundness issues, nonetheless, the products may possibly provide options that are reasonable clients.
Tax refund-related items can sometimes include some or every one of the features that are following
- Item exists by way of an income tax planning solution.
- Item is predominantly provided during income tax period.
- Charges connected with income tax planning along with other services or products are subtracted through the client’s taxation reimbursement.
- Consumer’s income tax reimbursement can be used to settle or collateralize the mortgage, or even to start a deposit or prepaid account.
- Just a percentage that is small of, exposed through the taxation period, stay active later on into the 12 months.
You can find three primary forms of taxation products that are refund-related
Tax credit that is refund-related presently available on the market include the annotated following:
- Reimbursement expectation loans (RAL), that are short-term loans produced in expectation of a tax reimbursement being qualified and compensated because of the irs (IRS) or state taxation authority. A bank makes the loan through third-party taxation preparers that provide both income tax planning solutions and RALs.
- “Holiday loans” and “pre-file” or “pay-stub” loans, that are provided through third-party income tax preparers prior to the client receives a W-2 kind for the present 12 months. These loans exhibit more credit danger than typical RALs because funds are advanced level according to past years’ earnings or a pay stub that is current.
- Other bank programs that anticipate (even though they don’t always require) loan payment from future income income tax refund proceeds.
Deposit products and access that is prepaid
Tax refund-related deposit items presently available on the market involve the transmittal of a taxation refund by the relevant taxation authority 1 to (1) a restricted or special-purpose deposit account that a bank establishes to issue a check to your client 2 or (2) a bank-issued prepaid access card. 3
Tax refund-related settlement solutions include the transmittal of a income tax reimbursement by the relevant income tax authority up to an account that is bank-controlled. The lender typically releases funds towards the client after re re payment towards the income tax preparer for the tax planning solutions.
Safe and Sound Methods regarding the Tax Refund-Related Items
This guidance addresses noise underwriting and system administration methods for banking institutions offering tax refund-related services and products and it is on the basis of the premise that banking institutions should offer services and products that meet customers’ economic requirements on a nondiscriminatory foundation and without subjecting clients to treatment that is unfair.
Banking institutions’ danger administration policies, procedures, and methods for taxation refund-related items ought to be (1) commensurate aided by the complexity and nature of these activity; (2) in keeping with safe and banking that is sound and appropriate reporting demands; and (3) undertaken by having a admiration of and ability to deal with all relevant customer security and reputation danger factors, in addition to appropriate conformity obligations, from the task.
The danger management principles established in this guidance are divided into three groups: (1) danger administration for several income tax refund-related items; (2) supplementary danger administration for income tax refund-related services and products involving an expansion of credit (taxation credit that is refund-related); and (3) supplementary danger management for taxation refund-related products for transmitting a reimbursement (income tax refund-related deposit items).